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The second Payment Services Directive (PSD2) is four years in the making, and ecommerce businesses around the world have been bracing for its impact on September 14th. However, recent news indicates that the United Kingdom’s Financial Conduct Authority (FCA) is set to delay Strong Customer Authentication (SCA) requirements which could lead to the SCA’s postponement throughout the European Union. Additional delays have been announced in several other EU countries. Many businesses are left wondering how this affects their ability to sell in the EU.
Delayed or not, FastSpring sellers are compliant with PSD2 and the upcoming changes. As a Merchant of Record, FastSpring manages compliance with all global regulations on behalf of our sellers. Skip to the end of this article to learn more about how FastSpring is protecting global sellers.
Quick Recap: What is the PSD2?
The PSD2 is an EU-wide initiative to provide increased security for online shopping through a process called Strong Customer Authentication (SCA). Once PSD2 goes into effect, shoppers with European Union credit cards may be asked to confirm their identity before checking out with a merchant based in Europe. It’s important to keep in mind that only certain transactions are eligible for PSD2.
FastSpring will ensure that only shoppers attempting an eligible transaction experience SCA when required. Here are a few important considerations about eligible transactions:
- It only applies to customer-initiated transactions. Subscription re-bills are excluded from SCA, meaning only one-time online purchases or initial transactions of a subscription series are eligible.
- The issuing bank and acquiring bank must both be based in the European Economic Area (EEA). This means the buyer and merchant are both in the EEA.
- Purchases under €30 are exempt. This exemption is for small-dollar amount purchases unless there are five or more consecutive attempts that sum over €100.
Overview of the Recent Changes to the PSD2 Deadline
The UK’s Financial Conduct Authority has confirmed they will postpone the enforcement of PSD2 to allow online merchants more time to comply with SCA requirements. The new date for the UK is now March 2021.
In recent weeks, delays have also been announced by supervisory bodies in Austria, Germany, Ireland, Italy, Malta, and the Netherlands. A number of countries are expected to delay PSD2 enforcement before the original September 14th deadline.
What the PSD2 Delay Means for FastSpring Sellers
Given the push for uniformity across the EU, we expect most other EU countries to follow suit with the UK and delay SCA enforcement. FastSpring expects our conversion rates to continue performing at industry-leading levels. For EU transactions, where SCA is eventually required, we expect our superior conversion rate performance to widen relative to other merchants given thoughtful solution design that minimizes shopping disruption, rigorous testing we have conducted over several months, and expertise in-house and leveraged through partners across the payments ecosystem.
Timing of SCA enforcement may vary by country (and by issuing bank), so in order to ensure the least disruption possible and maintain the highest possible conversion rates, merchants should have dynamic routing capabilities to selectively route transactions through an SCA shopping flow—and be ready to quickly adapt as more countries and issuing banks begin enforcement.
In the case of some issuing banks, approval rates may decrease with the introduction of SCA, but FastSpring has made precautions in our UX and payment processor integrations to minimize potential negative impacts. The goal of the SCA is to reduce fraud and prevent chargebacks due to liability for authenticated transactions shifting to the issuing banks in some cases.
Regardless of timing for the UK or other European countries, FastSpring stands ready to support SCA whether it takes effect on September 14th or at a later date. FastSpring applies intelligent routing to all transactions, and SCA will only apply on an as-needed basis determined by the requirements of each cardholder’s issuing bank. This ensures the least amount of disruption possible in the ecommerce shopping experience facilitated by FastSpring.
What does the PSD2 Mean for Non-FastSpring Sellers?
In short, if you are not partnered with FastSpring, you are on the hook for adhering to the new regulations. This means you have to research and understand the PSD2, the specific requirements it entails including the SCA and implementing the 3DS2 authentication. Failure to do so will result in financial penalties and affect your ability to sell to EU-residents.
As there are still questions left to be resolved, sellers can rest-assured that FastSpring will remain PSD2-ready and continue to deliver a fully compliant checkout and payments experience with the highest conversion and approval rate performance in the market. Request a demo today to see first-hand how FastSpring protects software companies selling globally.
